Top Israeli Regulators Warn: Newly Formed Knesset Panel Could Undermine Capital Markets

Zvi Zrahiya
Zvi Zrahiya
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Eliezer Fishman outside court in Tel Aviv.
Eliezer Fishman outside court in Tel Aviv.Credit: Ofer Vaknin
Zvi Zrahiya
Zvi Zrahiya

Three of Israel’s top regulators and the CEO of the Tel Aviv Stock Exchange warned on Wednesday that empowering a newly formed Knesset committee to summon the CEOs of publicly traded companies could deter investors and undermine capital markets.

“Do you really think that Gil Shwed of Check Point Software technologies or Ziv Aviram and Amnon Shashua of Mobileye would consider listing their companies here for trading if they know they may face a public shaming and have to provide documents to the Knesset? asked Shmuel Hauser, the chairman of the Israeli Securities Authority, referring to three of Israel’s leading high-tech entrepreneurs.

The warning came as the Knesset voted to form what is officially called the Parliamentary Investigative Committee into the Conduct of the Financial System in Credit Agreements with Large Business Borrowers. The panel is popularly known as the “Fishman committee,” coming after tycoon Eliezer Fishman was declared bankrupt last month, leaving billions of shekels in unpaid debt.

The 11-member committee will be exploring how Fishman and others borrowed from Israeli banks and in many cases failed to repay the loans. On Wednesday lawmakers discussed empowering the committee to call up CEOs and other employees of publicly traded companies – including those who once worked at them – or face a penalty.

Hauser stressed that he didn’t oppose the committee’s being formed and said he supported regulators appearing in front of Knesset committees.

However, he said, “The proposal concerning public companies is destructive to the stock exchange, destructive to the world of public companies and detrimental to the economy.”

He said the proposed law would deter companies from listing on the stock exchange or encourage others to delist at a time when officials are trying to revive the lackluster TASE.

The penalties, to be imposed by the panel’s chairman, could include barring those who refuse a summons, or anyone working in his or her name including lobbyists, from appearing at any other Knesset committee meeting for six months.

No vote was taken on the wider powers, so the Fishman committee will begin its work without them.

Hauser’s warning was echoed by Hedva Ber, banks supervisor at the Bank of Israel, Dorit Salinger, the capital markets commissioner and TASE CEO Itay Ben-Zeev.

“The danger of the proposed law is that it will lead to business and lending entities avoiding making business decisions,” Ber said. “I have already met with businesses that say they are not taking out loans from the banks because they are scared. If lenders, banks and other institutions are hesitant to make loans to industry and home construction ... there won’t be any economic growth. That’s the risk in this proposal.”

Nili Even Chen, chairwoman of the Movement for Quality Government, proposed adding a clause to the legislation that would require those appearing before the committee to sign an affidavit swearing they will tell the truth of face a penalty.